Plot
A year after surviving Freddy Krueger's killing spree, Alice Johnson is in a relationship with Dan Jordan. One day, while taking a shower after having sex with Dan, Alice has a vision of herself dressed in a nun's habit with a name tag saying Amanda Krueger, at a strange asylum. She is attacked by patients at the hospital but wakes up. The next day, Alice is graduating from high school alongside her new friends: Greta Gibson, an aspiring but reluctant supermodel; Mark Gray, a comic book fan; and Yvonne Miller, a hospital volunteer and swimmer. Alice confides her nightmare to Dan, who tells her she is in control of her dreams.
On her way to work, Alice finds herself back at the asylum, where she sees Amanda giving birth to a gruesomely deformed baby. Amanda tries to collect the baby before it escapes, but it sneaks out of the operating room. Alice follows the baby into the church where she defeated Freddy in the previous film. The baby finds Freddy's remains and quickly grows into an adult, hinting to Alice that he has found the key to coming back. Alarmed, she contacts Dan, who falls asleep en route to see her. Freddy attacks and electrocutes Dan, turning him into a frightful man/machine hybrid before sending him into oncoming traffic. Alice sees Dan's body come to life and taunt her before she faints. Waking in a hospital, she hears the news of Dan's death and that she is pregnant with his child. During the night, she is visited by a young boy named Jacob, but the next day, Yvonne tells her there are no children on her floor, nor is there a children's ward.
Alice tells her friends about Freddy and his lineage. Yvonne refuses to listen, but Mark and Greta are more supportive. That afternoon, at a dinner party at her home, Greta falls asleep at the table. She dreams of herself snapping at her mother and ranting about her controlling nature before Freddy arrives and forces Greta to eat her own organs before choking her in front of a laughing audience. In the real world, Greta falls down dead in front of her mother and their guests. Yvonne and Alice visit Mark, who is grieving Greta's death, and a rift forms between them. Mark falls asleep and is nearly killed by Freddy, but Alice saves him before seeing Jacob again. Jacob hints that Alice is his mother. Alice requests that Yvonne get her an early ultrasound and discovers Freddy is using Jacob as a conduit to attack her friends even when she is awake and has been feeding him his victims to make him like himself.
Yvonne and Dan's parents still believe Alice is crazy. Dan's parents insist that she give them the baby when it is born, which Alice refuses. Alice and Mark research Krueger and the nun Amanda. Realizing Amanda was trying to stop Freddy, they investigate her whereabouts, and Alice goes to sleep, hoping to find Amanda at the asylum. While there, Freddy lures her away by threatening Yvonne, who has fallen asleep in a Jacuzzi. Alice rescues Yvonne, who finally believes her. Mark falls asleep and is pulled into a comic book world, where, after becoming a superhero to fight Freddy, he turns into a supervillain, transforms Mark into a paper cutout, and slashes him to pieces.
Alice goes to bed to find Freddy and save her son. Realizing Freddy has been hiding within her every time she fell asleep, she draws Freddy out from within herself. Yvonne finds Amanda's remains at the asylum, and Amanda joins the fight in the dream world, encouraging Jacob to use the power Freddy had been giving him. Jacob destroys Freddy, and his infant form is absorbed by his mother, while Alice picks up baby Jacob. Warning Alice away, Amanda seals Freddy away in time.
Several months later, Jacob Daniel Johnson is enjoying a picnic with his mother, grandfather, and Yvonne. Some children jumping rope nearby are humming Freddy's rhyme, hinting at Freddy's return.
